Traditional benefit plans are very common and can cover drugs, extended health benefits, life insurance, accidental death and dismemberment, short and long term disability, out of country and dental. Typically, these plans outline specific benefit coverage with set benefit amounts that may include deductibles and coinsurance. Benefits are usually mandatory, except extended health and dental, which can be waived if benefits are available through a spouse or significant other.

Traditional plans are analyzed annually and the premium can increase or decrease depending on the demographics of your organization, health care inflation for the year, and whether the previous year’s claims exceeded what was expected.

A Health Spending Account is similar to a bank account, and is often used as a supplement or alternative to a traditional benefit plan. The accounts are tax-free, and designed to provide a way to provide for the health care of the account holder and his/her dependent family members. The account is flexible, and there is no set plan design.

Employer is able to cap their costs, as opposed to a traditional plan which can see premium rate increases

Employees have more flexibility as to what expenses they want reimbursed, and reimbursements are received tax-free

Most health spending account plans allow for the unused balance to be rolled over to the subsequent year, and any unused balance in the second year is returned to employer

It is not uncommon to integrate a traditional plan with a Health Spending Account, which can reduce the premium of the traditional plan while still providing coverage to employees. This also serves to provide more options for employees, since they are able to allocate certain amounts to their individual health care priorities.

Example: Removing dental and vision from a plan and implementing a $500 Health Spending Account.